The FTA and a fall in exports

Ross Gar­naut, long a foe of the FTA nego­ti­a­tions, makes the extra­or­di­nary claim in today’s “Aus­tralian newspaper”:http://www.theaustralian.news.com.au/common/story_page/0,5744,8633296%5E7583,00.html that the focus of trade offi­cials on the FTA over the past year of nego­ti­a­tions has been a dere­lic­tion of duty bq. Offi­cial Aus­tralia has not yet faced up to the sever­i­ty of the present trade prob­lem. Exports have declined in each of the past three years after 15 years of sus­tained strong growth. Nev­er in the 20th cen­tu­ry did exports decline for three years in a row — not even in the Great Depres­sion of the 1930s or in either of the world wars. This ter­ri­bly mis­lead­ing. No one—least of all the Reserve Bank—has ignored the export trends: Ross has no rea­son to be ring­ing alarm bells. The trends have noth­ing what­ev­er to do with the focus of (some of) the Can­ber­ra pol­i­cy com­mu­ni­ty on the FTA over the past 12 months. There are much sim­pler and much more com­pelling rea­sons that are evi­dent in the data (chart­ed from Reserve Bank series “here”:http://www.rba.gov.au/Statistics/Bulletin/index.html#table_h).

The fall in mer­chan­dise exports is due to the sharp fall in rur­al and resources exports, that togeth­er make up 40% of our total exports of goods and ser­vices. The rea­sons? Not, as Prof. Gar­naut alleges, lack of offi­cial atten­tion, or the FTA or the col­lapse of the WTO Can­cún meet­ing or even the US Farm Bill (which affect­ed only US farm­ers direct­ly). The falls are ful­ly explained by the com­bi­na­tion of the worst drought in a cen­tu­ry that dec­i­mat­ed har­vests of grains, sheep, wool, dairy and hor­ti­cul­ture plus an adverse swing in the val­ue of the $Aus from US0.55¢ in 2001 to US0.77¢ today that has made our exports of both rur­al and min­er­al rea­sources less valu­able in $Aus. A sim­i­lar cur­ren­cy effect (plus SARS) is evi­dent in the export record of the price-sen­si­tive ser­vices sec­tor. Exports here, too, have been grow­ing strong­ly despite the alleged ‘lack of offi­cial atten­tion’. Ross’ oth­er claims are equal­ly con­tentious. * He makes unfound­ed claims about the ‘deal’ on the US farm bill. This deal, if it real­ly exist­ed, was entire­ly a US domes­tic ‘trade-off’ in which Aus­tralian inter­ests played no part at all. If the pas­sage of the sub­sidy-heavy Farm Bill real­ly did clear the way for the Con­gress to grant the Pres­i­dent author­i­ty to nego­ti­ate for­eign trade deals—this is the Administration’s ‘spin’ on the Farm Bill—then it enabled the launch of the mul­ti­lat­er­al nego­ti­a­tions from which Aus­tralian farm, ser­vices and man­u­fac­tur­ing indus­tries still stand to ben­e­fit. * He forecasts—apparently against his own assess­ment of the poor oppor­tu­ni­ties won in the US market—that Australia’s farm exports to Asia will col­lapse fol­low­ing the FTA. * He rolls out the same tired old fur­phy that Australia’s efforts on the FTA con­tributed to ‘starv­ing the mul­ti­lat­er­al trade nego­ti­a­tions of oxy­gen’. Hav­ing been close­ly involved in both the mul­ti­lat­er­al efforts lead­ing to Can­cún and in the FTA (on behalf of clients), I can say from my own expe­ri­ence that this is balder­dash.

Peter Gallagher

Peter Gallagher is student of piano and photography. He was formerly a senior trade official of the Australian government. For some years after leaving government, he consulted to international organizations, governments and business groups on trade and public policy.

He teaches graduate classes at the University of Adelaide on trade research methods and the role of firms in trade and growth and tweets trade (and other) stuff from @pwgallagher